Chairman Shuster and Ranking Member Rahall have designated this panel to examine the current state of freight transportation in the United States, and how improving freight transportation can strengthen the United States economy. The safe and efficient movement of freight throughout the Nation impacts the day-to-day lives of every American, from the clothes you wear to the car you drive to the food you eat—the freight transportation system impacts all aspects of everyday life. In 2011, the U.S. transportation system moved 17.6 billion tons of goods valued at over $18.8 trillion.

In the past, the conversation about freight transportation is focused on specific modes of transportation. However, given the multimodal nature of freight movement, it is important to examine the system as a whole. Goods frequently move back and forth between ocean vessels, highways, railroads, air carriers, inland waterways, ports, and pipelines. Bottlenecks arising at any point on the system can seriously impede freight mobility and drive up the cost of the goods impacted. For this reason, improving the efficient and safe flow of freight across all modes of transportation is critical to the health of the United States economy and the future of the Nation’s global competitiveness.

FREDERICK W. SMITH, CHAIRMAN, PRESIDENT, AND CEO, FEDEX CORPORATION

When I first began in transportation, logistics measured as the cost of transportation, inventory, carrying cost, and warehousing were about $.15 out of every dollar in the economy. And because of the substantial improvements in the Nation’s infrastructure, and the deregulation that took place beginning in the early seventies through 1994, logistics costs were reduced to about 9 percent.

The second thing which we feel very strongly about and is a very easy and quick solution, is to permit the use of longer vehicles in the sectors of the industry that use twin trailers. Today those are limited to 28 feet each. And the reality is, in the ground parcel business, the vehicles are significantly underutilized because the traffic being generated by the e-commerce world, the direct shipping, and the lighter weight, smaller packages, the vehicles are not very well utilized. They pull approximately 22,000 to 24,000 pounds in the two 28-foot trailers.

In the less-than-truckload industry the same thing applies. On there the cube weight ratio will get between 26,000 and 28,000, generally. So, if the Congress permitted the use of somewhat longer vehicles, our recommendation is 33-foot vehicles which would take 600,000 truck trips per year off the road. You would have very quickly vast improvement in national efficiency because you would burn hundreds of millions of gallons of fuel less.

And the third thing that would happen is that you would have significantly enhanced safety because fewer vehicles on the road at the end of the day is the most important element in reducing the number of accidents.

The permission to use longer twin vehicles, not—it does not require any weight increase, which puts more pressure on our infrastructure, in terms of repairs and things of that nature.

It is very difficult to simply raise the fuel tax on an inflation-adjusted basis, back to where it was in 1994, despite the fact that the fuel efficiency of personal automobiles and over-the-road vehicles and all is significantly greater. And I think the reason for that, quite frankly, is that we have had a vast increase in fuel taxes that have been imposed by OPEC, by the price of fuel. So people are very sensitive to the fact that today they are paying, you know, close to $4 a gallon, $3.50, and when we started this decade they were paying less than a fifth of that. FedEx Express, I remember in the spring of 2001, was paying $.67 for a gallon of jet fuel. And today it is $3.30, $3.40, something. You know, it is not a little bit. It is five times. So the average family in the United States is now paying between $2,500 and $3,000 more for gasoline per year than they were 10 years ago.

That is why you have had such a hard time, it seems to me, increasing the gasoline tax, because it just adds to that. But it still doesn’t mitigate the fact that our infrastructure is aging, and our entire economy, as Chairman Duncan said in his opening remarks, you know, depends on this transportation and logistics infrastructure. And we either fix it, improve it, modernize it, and expand it, or we will have a lower standard of living and a lower national income. That is just absolutely 100 percent predictable.

Norfolk Southern is the fourth largest privately owned U.S. railroad. Our locomotives last for more than 20 years. Freight cars last a lot longer than that. New tracks can carry traffic for decades. And big terminals—we are expanding one in Bellevue, Ohio, now— serve, literally, generations of customers. We had a bridge over the Ohio River that just turned 100 years old.

We are at the point where we are approaching a crisis. The Interstate Highway System was designed with a 50-year life, and it was built about 50 years ago.

Approximately a third of all rail freight that moves in this Nation moves through Chicago. And that is because, historically, the infrastructure was routed that way. So it is absolutely critically important. It is the single most important point in the North American rail network. And I can tell you that when things don’t go well in Chicago—an example being the blizzard that we experienced up there, all of the freight rail networks start to slow down.

If you look at our operations into Chicago, it is our single most important link. We run about 100 freight trains a day in and out of Chicago. And once you get into Chicago, because it is infrastructure that was built over a long period of time accretively, the routes are not particularly efficient. And there is a lot of work that needs to be done. Now, at the same time, that inefficiency of moving traffic through Chicago results in significant delays to the community because of grade crossing congestion. And it presents serious problems for Metro. So it is, of all of the things that—and all the locations that matter not only to Norfolk Southern, but to the North American rail network, Chicago is always number one.

So the Crescent Corridor was identified primarily as we started to look across our network and started to see on the highway system an enormous amount of freight flow traffic, 5 to 6 million trucks a year, which essentially move from the South and the Southwest, up into New York, New Jersey, New England. And it was the largest such freight corridor which has never really had effective rail intermodal service. But it matches up very well to our routes. So, we started to develop a plan to start to add terminals, such as the one at Memphis, one at Birmingham, several in Pennsylvania, to add infrastructure, in terms of capacity, and to enable us to run higher speeds, to be able to provide service to folks like Mr. Leathers and his customers that would be competitive with the truck and offer a better economic solution.

Federal dollars made a lot of difference for us—although most of the investment is ours—is it allowed us to accelerate a lot of projects that we might have done over a 10- or 12-year period, but instead we could do them in 3 or 4 and realize those public benefits, as well as the private benefits, much faster. The Crescent Corridor has about $2 billion in public benefit built in, which has been very carefully analyzed by outside agencies. So it was the culmination of a big project on our part. But as we approached both Federal officials and State officials and told them what we were doing, and told them the impact it would have on highways like Interstate 81, it was enthusiastically embraced by a lot of people. Only in very limited instances will we need to acquire new-right-of-way where we might have to expand from one track to two. It was essentially our existing infrastructure, but a lot of money spent to enhance it. The railroads do have—historically, have always had condemnation rights for rights of way. But it is something we employ very, very rarely. And to my knowledge, did not ever employ in this corridor.

We are a diversified logistics company with nationwide and global services, providing truckload freight management and intermodal services to our customers. My statement is consistent with the position of the American Trucking Association, of which we are a member.

Unlike other modes which control their capital investment decisions, the trucking industry is wholly dependent on Federal and State and public agencies to spend the $33 billion in highway user fees the trucking industry contributes annually in a way that provides the industry with good return on our investment through the improvements and highways and infrastructure on which we operate.

Highway bottlenecks cost the trucking industry $19 billion each year in lost fuel, wages, and equipment utilization. We also recommend a much greater investment in the National Highway System, which comprises just 5 percent of highway miles, yet carries 97 percent of truck freight and 55% of all traffic.

The ATA supports dedicated Federal spending for last-mile highway intermodal connectors whose generally poor condition affects the efficiencies of all our modes. It will be difficult, however, to make these strategic infrastructure investments without more revenue. As the committee is well aware, the Highway Trust Fund will be in serious financial straits in 18 months from now. We cannot continue to rely on the general fund to bail out the program year after year. And reducing the size of the program to match current user fee receipts is simply untenable, in our view. It is time for Congress to make the difficult but vital decision to raise and/or index the fuel tax, or do both, to ensure stable funding is available to address the costly deficiencies facing our highway network.

While we are bullish on the future of intermodal, and actively work with our customers on modal conversion, claims that these changes will have significant impact on modal share, in my view, are overstated. Seventy percent of all freight moves by truck today. And although intermodal volumes are growing rapidly, intermodal’s 1.8 to 2.2 percent share is unlikely to change, even in the most bullish projections.

As for whether we do or don’t pay our fair share, I think that will be much to be debated. In the meantime, what I do know is that over 70% of everything delivered to every American in this country is delivered by truck. So whatever wear and tear we may cause is probably wear and tear that people are proud to have us do so they can have the goods and services they enjoy every day. So we will continue to work with the rail, and we will continue to work within our modal solutions on longer length of hauls. But at the end of the day, unless we are going to put rail tracks behind our homes and businesses or dig canals for barges, I suggest that we continue to focus at the task at hand, which is how do we invest in the American infrastructure

James I. Newsome, III, President and CEO, South Carolina Ports Authority

The container shipping industry has been instrumental in the significant growth of globalization over the last 50 years. U.S. shippers enjoy a very competitive market for ocean transportation services. The service provided for containerized cargo is remarkably reliable, and has supported the establishment of complex import and export supply chains routinely utilized by major U.S. corporations in their global transactions.

It also should be noted that ports face significant competition. Ocean carriers have a choice of where to call and when. If a port is unable to provide an efficient and cost-effective option, its customers will go elsewhere. The prospect of heightened competition has been mentioned here this morning between east and west coast ports as a result of the Panama Canal expansion.

Globalization and the offshoring of significant amounts of manufacturing have led to significant trade growth, a lot of which was import-related.

This year we will see the largest injection of new container capacity into the global container fleet in the history of containerization. Eighty percent of the container ship capacity on order is bigger than can go through the Panama Canal today. And by the time the Panama Canal is expanded in 2015, 50% of the container ship capacity and operation will be post-Panamax in size.

These large ships bring dramatic improvements in both economic and environmental efficiency. They require reliable ports at origin and destination to realize these benefits capable of handling such ships productively, and with minimal waiting due to depth or height restrictions. Ports across the country have made and continued to make significant investment in order to satisfy such requirements. For example, the South Carolina Ports Authority is investing $1.3 billion in the next 10 years in existing and new facilities to handle mainly cargo growth. The State of South Carolina is additionally investing $700 million in port-related infrastructure. In view of the uncertainty with regard to the availability of Federal harbor deepening appropriations, the State of South Carolina has set aside the entire $300 million cost of our deepening project, both the State and the Federal share. Our deepening project is designed to provide a 50-foot harbor comparable to others already authorized on the east coast, allowing the handling of ships at 48 feet of draft without title restriction,

Going forward, it is vital that a viable strategy and process is established at the Federal level to bring the port capability in line with the handling requirements for such large ships. This is a prime responsibility of the Federal Government, as these are Federal harbors. The process for studying and funding harbor improvements and other restrictive infrastructure issues such as low bridges has neither been timely, predictable, nor well-funded.

The legislative process for approval and funding of major port projects has been—also been made more difficult by the demise of the Federal earmark, which is a traditional source of funding such projects. Accordingly, the funding is woefully short of the requirement and commitment needed to modernize the U.S. port network, and is an impediment to future freight mobility.

Edward Wytkind, President, Transportation Trades Department, AFL–CIO

I am also honored to offer the perspective of transportation workers. Whether they work in the freight rail, port, maritime, aviation, highway, or trucking sectors, they together make up a transportation system for America that works and that delivers for the American people and American businesses. They are also members of the 33-member unions of the Transportation Trades Department, AFL–CIO, that I am the head of.

We all know the facts. No matter which analysis you read, the conclusion is the same. Our infrastructure is falling apart, and the world’s strongest economy is forced to function with an infrastructure that barely cracks the world’s top 25. When channels are too shallow to receive large vessels, or railroads are located miles from ports or the aviation system’s technology improvements are stalled, unnecessary delays and congestions slow our commerce. Those inefficiencies, in turn, choke the economy and impose costs on businesses that, in turn, undermine our competitiveness and job creation efforts.

The surface transportation funding crisis needs to be solved. The Highway Trust Fund is broken, it is facing insolvency by 2015. For 20 years it hasn’t seen its buying power go up, and it is now down 33%. There is a straightforward way to do this. It requires the political leaders in Washington to tell the truth to the American people and to businesses. Unless we increase revenues flowing into this collapsing fund—yes, by raising the gas tax, I said it, I will say it five more times—our highways, bridges, and public transit systems will fail us and our economy will crater.

Ms. HAHN. I want to say again how pleased I am that we are talking about the Harbor Maintenance Trust Fund. I just think that is a problem in search of a solution. There is $9 billion that is surplus that is not being used for the intended purposes. And I think we really lose the public’s trust when we continue to ask for taxes, raise taxes, and don’t use them for the intended purpose. L.A./Long Beach, of course, is the donor port in that Harbor Maintenance Tax. We only get .1 percent back of what we give.

I am curious to know if we are moving towards cleaner, greener fleets with FedEx or rail? Are we closer to any kind of real cleaning or electrifying of our trains, our trucks? I know we are not close to having an electric drive system that actually can work for a long haul. But where are we, and should we, as we talk about a national freight policy, should we address this in a proactive way so that any kind of expansions or, you know, more investment in infrastructure projects, we address this at the same time so as not to have a conflict with environmental mitigation?

Mr. SMITH.The easiest and best way to reduce emissions and pollution is making our transportation infrastructure more efficient. Everything that we have talked about today, Next Generation air transportation, corridor improvements, infrastructure funding by increased fuel taxes, as long as that money is spent on infrastructure, it will reduce the number of vehicles or activities, and there will be a commensurate reduction in emissions.

Ms. HAHN. We found that to be true in the Alameda Corridor. We got rid of 200 grade—at-grade crossings. And what started out to be just an efficient way to move cargo turned into being an incredibly environmentally sound project that reduced emissions with cars, of course, waiting at grade separations.

Mr. MOORMAN. There is an enormous amount the rail industry is doing, in terms of reducing emissions. We already have a approximately 3-fold advantage, in terms of fuel efficiency versus the long-distance highway transportation. So we are generally viewed as the cleaner form of transportation.

Mr. LEATHERS. We are experimenting with natural gas, both compressed natural gas and L&G liquefied natural gas. But in both cases it is a very expensive technology.

Mr. NEWSOME. The international and domestic container shipping industry has been on the forefront of environmental efficiency. The very building of large ships is environmentally efficient. We are going to carry more cargo on the same number of ships, accommodating our growth in much more fuel and environmentally efficient ships.

Mr. WYTKIND. And let’s not forget. I know no one has mentioned the word ‘‘public transit’’ in this hearing. If you boost public transit in this country, and you boost it in some of these large, metropolitan areas and give them more resources so they can expand, not have to cut service, like we are seeing around the country, that relieves congestion, that makes more room for freight, and that is good environmental policy, as well.